[Federal Register Volume 60, Number 151 (Monday, August 7, 1995)]
[Notices]
[Pages 40221-40222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19365]



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SOCIAL SECURITY ADMINISTRATION


Social Security Ruling SSR 95-3p.; Title II: Transactions 
Involving Noncash Transfers for Agricultural Labor

AGENCY: Social Security Administration.

ACTION: Notice of Social Security Ruling.

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SUMMARY: In accordance with 20 CFR 422.406(b)(1), the Commissioner of 
Social Security gives notice of Social Security Ruling 95-3p. This 
Policy Interpretation Ruling explains when certain transactions 
involving noncash transfers for agricultural labor may be considered 
wages under Section 209(a) of the Social Security Act. The Internal 
Revenue Service (IRS) issued guidelines for evaluating whether such 
transactions are, in economic reality, payments in cash and therefore 
wages for purposes of the Federal Insurance Contributions Act tax. 
Since the Social Security Administration (SSA) does not have such 
guidelines, these transactions have not been treated by SSA as wage 
payments for Social Security coverage and annual earnings test 
purposes. The purpose of this Ruling is to achieve consistent treatment 
between SSA and the IRS of transactions involving noncash transfers for 
agricultural labor.

EFFECTIVE DATE: August 7,1995.

FOR FURTHER INFORMATION CONTACT: Joanne K. Castello, Division of 
Regulations and Rulings, Social Security Administration, 6401 Security 
Boulevard, Baltimore, MD 21235, (410) 965-1711.

SUPPLEMENTARY INFORMATION: Although we are not required to do so 
pursuant to 5 U.S.C. 552(a)(1) and (a)(2), we are publishing this 
Social Security Ruling in accordance with 20 CFR 422.406(b)(1).
    Social Security Rulings make available to the public precedential 
decisions relating to the Federal old-age, survivors, disability, 
supplemental security income, and black lung benefits programs. Social 
Security Rulings may be based on case decisions made at all 
administrative levels of adjudication, Federal court decisions, 
Commissioner's decisions, opinions of the Office of the General 
Counsel, and other policy interpretations of the law and regulations.
    Although Social Security Rulings do not have the force and effect 
of the law or regulations, they are binding on all components of the 
Social Security Administration, in accordance with 20 CFR 
422.406(b)(1), and are to be relied upon as precedents in adjudicating 
other cases.
    If this Social Security Ruling is later superseded, modified, or 
rescinded, we will publish a notice in the Federal Register to that 
effect.

(Catalog of Federal Domestic Assistance, Program Nos. 96.001 Social 
Security--Disability Insurance; 96.002 Social Security--Retirement 
Insurance; 96.004 Social Security--Survivors Insurance; 96.005 
Special Benefits for Disabled Coal Miners)

    Dated: July 27,1995.
Shirley S. Chater,
Commissioner of Social Security.
Policy Interpretation Ruling--Title II: Transactions Involving Noncash 
Transfers for Agricultural Labor

    Purpose: This Ruling explains when certain transactions involving 
noncash transfers for agricultural labor may be considered wages under 
section 209(a) of the Social Security Act. The purpose of this Ruling 
is to provide that the treatment afforded by the Social Security 
Administration (SSA) of such transactions will be the same as the 
treatment afforded by the Internal Revenue Service (IRS).
    Citation (Authority): Sections 209(a), 210(f), and 210(j)(2) of the 
Social Security Act (the Act); Regulations No. 4, sections 404.1005, 
404.1007, 404.1010, 404.1016, 404.1017, 404.1041(e), 404.1055, 
404.1056, 404.1068(c), and 404.1074.
    Background: Section 209(a)(7)(A) of the Act and section 
3121(a)(8)(A) of the Internal Revenue Code (IRC) provide that, for 
purposes of Social Security coverage and Federal Insurance 
Contributions Act (FICA) taxation, respectively, the term ``wages'' 
does not include ``remuneration paid in any medium other than cash for 
agricultural labor'' (as defined in section 210(f) of the Act and 
section 3121(g) of the IRC). Any medium other than cash (generally 
referred to as ``in-kind'' payments) includes, for example, lodging, 
food, clothing, or agricultural commodities. Some farmers have 
attempted to use commodity payments as remuneration for agricultural 
services to avoid paying FICA tax. This practice can prevent farm 
workers from accumulating the quarters of coverage needed to qualify 
for Social Security benefits. However, the IRS clarified in Revenue 
Ruling 79-207 and in subsequent guidelines that a transfer of an in-
kind item which is immediately converted to cash is, in economic 
reality, a payment in cash not subject to the wage exclusion. The 
effect of the ruling is that certain transactions involving in-kind 
transfers for agricultural labor have been considered cash payments and 
therefore wages subject to tax under FICA. SSA policy has been not to 
treat such in-kind transfers as wages under the Act when evaluating 
them for Social Security coverage purposes.
    To achieve consistent treatment between SSA and the IRS of 
transactions involving in-kind transfers for agricultural labor, SSA is 
adopting 

[[Page 40222]]
the policy position in IRS Revenue Ruling 79-207.
    Policy Interpretation: To determine whether certain transactions 
involving in-kind transfers for agricultural labor are wages within the 
meaning of section 209(a) of the Act, and thus creditable as wages for 
Social Security benefit purposes, SSA will consider the following:
    1. Does an employer-employee relationship exist? Only noncash 
payments to an employee qualify for the section 209(a)(7)(A) exception. 
In-kind payments received by a self-employed individual engaged in 
farming are not subject to this exception and may be considered in 
determining self-employment income which is credited for Social 
Security coverage purposes. Section 210(j)(2) of the Act defines 
``employee'' as ``any individual who, under the usual common law rules 
applicable in determining the employer-employee relationship, has the 
status of an employee.'' SSA's rules for evaluating whether an 
individual is a common-law employee are found in 20 CFR 404.1007.
    When a farmer's spouse (or child 18 or older) performs agricultural 
labor for the farmer, the individual may be an employee. Generally, an 
employer-employee relationship exists when the person for whom the 
labor is performed has the right to control and direct the person who 
performs the services. Special coverage rules with respect to farm crew 
leaders, foreign agricultural workers, and sharefarmers are found in 20 
CFR 404.1010, 404.1016, 404.1017, 404.1068(c), and 404.1074.
    2. Is the in-kind transfer, in economic reality, equivalent to a 
payment in cash? Although section 209(a)(7)(A) of the Act excludes from 
the definition of covered wages remuneration paid in any medium other 
than cash for agricultural labor, if a bona fide transfer of the 
noncash medium from the employer to the employee has not occurred and 
the transaction is, in economic reality, equivalent to a payment in 
cash, the wage exclusion will not apply.
    In determining whether a transaction involving a noncash medium is, 
in economic reality, a payment in cash, SSA will consider the extent to 
which the employee exercised dominion and control over the noncash 
item. Many factors may be relevant including, among other things: (1) 
Whether the employer has transferred a readily identifiable portion of 
an item; (2) whether there is documentation of the transfer; (3) the 
length of time between the employee's receipt and sale of the item; (4) 
whether the employee negotiates the subsequent sale of the item; (5) 
whether the risk of gain or loss shifted to the employee; and (6) 
whether the employee bears the costs incident to ownership of the item, 
for example, storage, feeding, or maintenance costs.

    Example 1: A farm operator agrees to give an employee 30 head of 
cattle for services performed on the farm. The farm operator sells 
100 head of cattle to a commodity purchaser. The commodity purchaser 
gives the farm operator a check for 70 head of cattle and the 
employee a check for 30 head of cattle. These facts indicate that 
the cash proceeds from the sale are wages because the employee did 
not exercise dominion and control over the cattle.
    Example 2: A farm operator pays an employee $50 a month plus 10 
head of cattle per month for services performed on the farm. The 
employee pays the farm operator rent to maintain the cattle on the 
farm property in an area separate from the farm operator's 
livestock. The employee assumes the costs of feeding, maintaining, 
and transferring the cattle to the market for sale. The employee is 
paid directly by the commodity purchaser for the cattle. These facts 
indicate that the commodity payments are not wages because the 
employee exercises dominion and control over the cattle subsequent 
to receipt and bears the costs incident to ownership of the cattle.
    Example 3: An employment agreement provides that a farmer will 
compensate his wife in cash wages of $100 per month and transfer 100 
head of cattle each year. The wife's cattle are raised and 
maintained with the husband's cattle. Under the employment 
agreement, the farmer delivers the cattle to a market location 
agreed upon by the wife and at the market transfers ownership to the 
wife. The wife's cattle were not distinguishable or readily 
identifiable from the other cattle taken to market. The wife 
receives a check directly from the market for the cattle. Since the 
sale of the cattle occurs almost simultaneously with their delivery 
to the wife, these facts indicate that the in-kind transfer is, in 
substance, equivalent to a cash payment and therefore wages for 
Social Security purposes.

    Documentation: Evidence documenting the existence of an employment 
relationship, the terms of the agreement, and the transfer of 
commodities should be obtained. There is a presumption that an 
individual's earnings record as maintained by SSA is correct as posted. 
SSA determines whether the evidence is sufficient to overcome that 
presumption of correctness.
    Effective Date: This policy is effective upon publication of this 
Ruling in the Federal Register.
    Cross-References: Program Operations Manual System, Part 3, Chapter 
021, Subchapter 01; and Chapter 014, Subchapter 02, Section RS 
01402.020.

[FR Doc. 95-19365 Filed 8-4-95; 8:45 am]
BILLING CODE 4190-29-P